Nexus Law Group Founder Marcus McCarthy

Since the phrase ‘NewLaw’ was coined by George Beaton it has quickly become a meaningless buzzword. Multiple new businesses have jumped on the bandwagon and announced themselves as ‘NewLaw’ when, in fact, they are either just a traditionally structured firm operating virtually; a fixed pricing strategy; or a lawyer procurement agency for a disconnected bunch of sole operators and not a law firm at all.

Richard Susskind has predicted the end of lawyers with the emergence of artificial intelligence. But not everything that glitters is gold, and not everything that is artificial is ‘intelligent’ when it comes to serious lawyering.

Very little of the so called ‘NewLaw’ landscape is actually new at all, or delivers any net positive benefit to clients, and certainly not lawyers. Much of ‘NewLaw’ is not even run by qualified lawyers, or law firms. This may not be the best outcome for consumers despite the promise of a lower price tag or a fixed fees.

Anything that brings about less cost for consumers can be a good thing, and it is a laudable aim to service the end of the market that cannot afford traditional legal services, but there is one universal truth in this world – you get what you pay for. If the cost is driven too low, or is free, the quality of the advice always suffers. No one can expect real expertise done properly to be cheap or free.

If ‘NewLaw’ is only about less cost to consumers, then it is a false economy. Less professional value leads to less skilled and more generic input, which ultimately results in less protection, additional cost and problems in the long run. Online documents, even when intelligently automated, can be an example of this.

It is also true that there are always better ways to do things that can reduce cost and increase quality. If you can do both, it is the holy grail of business improvement (and, of course, a rare thing).

The problems with traditional practice

I came into the legal profession with a business management background and, although I loved being a lawyer, I could not understand why the legal profession was structured in the way that it was. Partnership models and corporate structures full of enslaved, unhappy lawyers on a path to nowhere who were constantly switching from job to job looking for a better world that did not exist. At the same time clients were (and still are) disgruntled with the high rates paid for lawyers.

I realised it was the very structure of traditional practice itself that caused the problem, driven by high overheads and unrealistic hourly budgets as a result. If both lawyers and clients are unhappy at the same time, something is clearly wrong with the system.

There was (and still is) a vast disconnect between the fees charged to clients by the larger firms and the low relative returns for skilled lawyers. This can drive many lawyers into sole practice, which can be an even harder and isolated road which does little to relieve their desire for a better professional career experience. The reason is simple – they end up replicating the same traditional structure they just came from, with the same overhead problems.

It is the law firm model itself that needed a change. In fact, the law firm model needed inverting so that great lawyers could take control of their own careers in independent practice, without the high overhead and budgets, but remain fully connected with others doing the same.

The answer was connected sole practice.

There is a vast sea of ex top-tier legal skill out there, but only by connecting them into one operating platform can they compete with the top-tier as a single law firm. A law firm based on the connection of independent contractors, instead of employees, could have less overheads and more skill at less cost than the traditional large firm structure ever could. Such a thing could be a new practice option in the market that did not previously exist – an option sitting squarely between the big firm model and sole practice, without the downsides of either.

Unfortunately, it did not exist. But with the help of some new cloud technology platforms, I created it. It’s called Nexus Law Group – Australia’s first ‘dispersed law firm’ or as I prefer to call it these days, the ‘embedded contractor law firm model’ (I’m still trying to come up with a less boring name for it …).

Changing the industry

What has been interesting to watch is how the industry reacts to this new model.

There are the typical naysayers that believe a firm based on embedded contractors could not be successful, or perceived it as a threat to the industry. However, it has proven to be very successful and, in my view, it was time for a positive change. There is certainly room for more than one practice structure in the market.

Most of ‘NewLaw’ are not engaged in any revision of the typical business structure of law or seeking to develop a culture of collaboration, commonwealth and information sharing.

Only the embedded consultant model is doing this. It is, in fact, one of the only new legal business models undertaking a fundamental and positive restructure of the law firm itself, and even the industry commentators seem to be missing this rather obvious point of difference in the NewLaw landscape.

Law firms vs legal networks

What is really confusing the industry right now is the difference between websites running simple networks of disconnected lawyers, recruitment or bidding services, and the embedded lawyer network. At first glance they look the same – but they are in fact vastly different.

Look past the flashy website and clever words and understand what is really happening behind the scenes. The difference between the two is obvious – one operates as a law firm, one does not. One has chosen to comply with legal profession legislation, one sidesteps it with a non-legal business that lists or procures independent lawyers. This is much easier to do, but comes at the cost of no longer being a law firm.

These are in fact ‘disconnected agency’ businesses that have no responsibility for the lawyers on their networks and do not properly connect them together in any way. This creates confusion when something goes wrong and opens the door for problems as the profession legislation states:

An entity must not engage in legal practice unless it is a qualified entity.”

Of course the agency networks will say they are not ‘engaging in’ legal practice. Although this perhaps neatly sidesteps the words it is, of course, nonsense as they are in the business of providing legal services. It will be interesting to see if the regulators ever decide to define legal practice for what it actually is – the delivery of legal services, or alternatively, exempt them. At the moment, the regulators seem unconcerned about this anomaly or asleep at the wheel.

The disconnected agency thing is proliferating at a rate of knots, simply because it is really easy to get on the ‘NewLaw’ bandwagon by throwing up a website and list a bunch of sole practitioners with the promise of work referrals. As such, the digital natives are having a field day, seemingly unconcerned about the legislative problem. It is of course much harder to build an actual law firm of embedded contractors (and much more functional).

Harnessing technology

When Nexus Law Group started in 2011, the technology did not exist to support a practice model such as this.

It wasn’t until 2013 that a cloud based practice system emerged that could run such a thing. We were able to work with the vendor to configure it to our exact requirements and build an open, universal remuneration system – the OpenLaw practice system – which now runs the Nexus Law Group.

The OpenLaw system is unique in that it allows the embedded connection of independent practices in a single platform, which allows our Consulting Principals to silo information for their own individual practices, while still providing the infrastructure needed to connect the Group for team based service.

It is a direct-access model that enables lawyers to increase their earning potential relative to traditional firms or sole practice through a direct input/direct reward remuneration system.

The system generously incentivises lawyers to refer to other specialists when a matter is outside their expertise, encouraging team-work and building a positive culture of client care.

It is a completely open and transparent system. Lawyers receive 70 per cent of everything they bill on their own matters, 60 per cent on matters referred to them, and 15 per cent of the fees for work they refer to others in the system.

To be completely open and even for all in the system was a core element in the idea behind Nexus. I wanted to ensure not only that highly skilled independent lawyers received the lion’s share for the work they do, but also for the central hub to retain enough fees to run the practice systems required for a national law firm. This, in turn, allows our lawyers to leverage off each other and the strong platform it creates.

The fact is, this universal remuneration metric alone replicates an equity partnership model without the need for a partnership or a corporate structure, which only drives up cost. The remuneration systems are fully automated and capture all work inputs for all lawyers in the system, regardless of the state (our country) in which they work.

Unlike a traditional structure – it is a freelance model which means our lawyers are free to set their own fees, including fixed fees, and to contract into in house roles or even whitelabel to other firms, which they do on a regular basis.

In building such a system we realised that it was borderless and replicable by jurisdiction so that anyone could run a dispersed law firm, including the possibility for third party firms to connect its lawyers to Nexus through a broader OpenLaw network using the same system. This has the potential to shift a large portion of the industry to this form of practice and connect separate lawyer networks together for mutual work referrals.

With a bit more tweaking we hope to launch the OpenLaw system to the broader market in the second half of this year.

And the reason for all this? To build a new foundation for the practice of modern law that is better for clients and better for the lawyers delivering it.

NewLaw vs BigLaw

Realistically ‘NewLaw’ will not wipe out the traditional big law firm, there are many people out there who draw comfort in the processes they have always known – a law firm with four walls and many lawyers, paralegals and support staff all under one roof.

Contrary to some industry commentators, it is not contractor models, emerging document automation or artificial intelligence that is disrupting the legal industry. It is the dangerous proliferation of non-lawyers delivering legal services and the rise of in-house legal teams (corporates are exempted from the above rule), who now run massive internal legal teams without regulation imposed overhead profiles of an actual law firm, and thus an uneven playing field.

The OpenLaw practice model is a viable practice alternative for lawyers, and a real value proposition for clients, who want to work directly with the lawyer of their choice without inflated fees driven by high overheads and budgets.

With technology and a common sense business model it is now possible to have some of the best lawyers in the industry at significantly less relative cost than when they were at their former big firms, while better rewarding them at the same time.

There is one universal driver for this model: happy lawyers make the best lawyers. Well rewarded lawyers, free from the strictures of traditional practice, are extremely happy – simple really.

With all of this worrying disruption out there, OpenLaw aims to bring about positive change to the industry by properly valuing and preserving the skill of experienced lawyers and bringing them together for unified service delivery, while respecting their independence and providing fair rewards for good work.

We may be swimming against the tide … but who cares, we are loving it.

Now don’t get too ahead of yourselves, this doesn’t mean I started working for free!

Instead I joined a law firm that is part of the ‘NewLaw’ wave. It is a dispersed law firm, with a completely different approach to the traditional. I am a bit of an enigma now, as I am my own boss, but still part of a team, giving direction to some and taking direction from others.

Since making the shift I have been asked – many times – by other lawyers whether I made the right choice. So I thought I would provide a little insight into a typical week for me and you can judge for yourselves … 

Monday

When I was a lawyer for a big, traditional law firm, Monday mornings usually meant hours lost to team meetings, frantic time entries, and reviewing and replying to a disturbingly large number of weekend emails from my supervising partner, colleagues in our team, and clients.

Since I made the decision to work for myself, away from traditional firms, this kind of frustrating lost time is no longer an issue. Instead, I spend my Monday at an office space I share in the centre of the Sydney CBD with a range of professionals, from a variety of different businesses, working my way through a list of work matters I made for myself on the weekend. Without any other distractions, I can focus on just those items, and finish them faster, and to a much higher quality, than I would have been able to do if I was still working at a traditional firm.

As I walk home, I can’t help but think that the traditional law firm model is overly focussed on billable hours, and as a consequence rewards inefficient delivery of legal services, and excessive negotiations and discussions between lawyers on non-material matters. No one wins from this arrangement.

That’s exactly why I needed to break away from this style of legal work, before I lost my love for the law altogether.

Tuesday

I have sports training this morning.

Rather than spending the entire time thinking about work, I can instead think about how all this exercise is good for me, and try to make it to the end of the session without falling over.

Finding the time to do things for myself, while working in a traditional firm, was incredibly difficult. Even if I did try and train before work, it meant getting up ridiculously early to ensure I wasn’t seen as a ‘late arrival’ for coming in 15 minutes later than everyone else. While lunchtime training or after-work catch-ups with friends always seemed good in theory, they inevitably never happened with any consistency as there was always some piece of work that came in right at the time I had to leave.

Today’s training session ends and I’m ready to start the working part of the day. The way in which I structure my day is now all up to me, and there is no one to judge me on how I structure my day but myself. As long as I meet (and exceed) client expectations, that it the only standard I set for myself. It is a good feeling.

Wednesday

On Wednesday morning, I am working from my home office when a client contacts me to ask if I can assist in registering some intellectual property rights for them. This isn’t my area at all, but I know someone who can do it and am glad for the opportunity to be able to refer work to a colleague.

If I were still working at my old firm, I would have felt an obligation to take on this work myself, and charge for it – even though it is out of my area of expertise.

Now, I work with a group of lawyers and administrative support staff that share a similar view on how to practice the law. The first people to come together and formalise this structure decided to create a nexus of lawyers and call it … well, Nexus Law Group.

As soon as I joined Nexus, I no longer had to spend hours on the administration and insurance aspects of a sole practice. Nexus covers that for me, and does it in a much more professional and structured way than I would be able to do alone. Being allied with Nexus means I can finally get on with being the lawyer I wanted to be, and focus on those parts of the law in which I am skilled.

So now, when this intellectual property matter comes in on a Wednesday morning, I can tell the client that I will refer it to someone I know and can trust to do it for them. I even get a financial benefit for the referral from Nexus. The distributed system pioneered by Nexus works, and works incredibly well, for everyone involved.

Thursday

Now that I’m reaching the end of another working week, I try to remember what it was like when I was shackled to the routine and inefficiencies of a traditional firm.

Not once this week did I feel obliged to get to the office at 8am and work until the last person leaves – whether that is at 5pm or midnight. Instead, I can respond to my clients when they need me. I can work on ways to build my business and ensure I can continue to do what I love. Most importantly, I now easily find the time to see my wife, my family and my friends.

That’s it. Nothing else exists to cloud my thinking or to get in the way of my personal happiness or professional success.

Traditional law firms require you to give up a part of yourself to be successful, and some do this better than others. I don’t judge those who succeed at big law firms. I just know that for me, this new way of doing law makes me happy and gives me purpose and drive. I have met great people who think the same as I do, and I see these relationships having great benefits in the short and long term.

Friday

Yes, Friday! I still have a lot of things on my list, but I still feel in control.

A client calls me to suggest a drink after work. He is a really nice person, and when we see each other we might chat about work, but it never feels like a ‘business development opportunity’ that I need to debrief a business development team about on Monday morning.

Don’t misunderstand me, I’ve worked a hard week this week. There were new matters and new clients to meet and build relationships with. Old matters flared up again at inconvenient times. I still had to take care of administrative matters like filing emails, preparing invoices, chasing outstanding bills, and writing articles.

But a hard week with Nexus, as a consulting principal and master of my own destiny, is not destructive in the same way I found it to be working for a big law firm. I can do everything I mentioned above, and more, next week and the week after that.

I no longer feel like I have survived this week. I feel like I succeeded.

That is the biggest difference for me, working with a dispersed law firm.